Collection Accounts Are Becoming More Prevalent

Credit card companies are also experiencing major losses in our current economic environment. In light of this, they are also tightening up their guidelines and becoming pickier on who they send “Pre-Approved Offers of Credit”.

They are also watching your accounts like a hawk. Not only accounts you have with them, but accounts you have with other credit card companies as well.

Your credit is being watched by all your credit card issuers more frequently than ever before. If you happen to become past due on any credit card you hold, then beware….you may be in danger of having your credit limit decreased or even frozen.

How does this affect your credit?

• Decreasing your credit limit can cause your balance-to-limit ratio to go up.

In order to achieve the highest credit scores you can possibly have, you don’t want your balance-to-limit ratio to exceed 30% (50% maximum) on any individual account, nor on the total amount of your revolving accounts combined. If a creditor decreases your credit limits on one or more accounts, this can have an immediate negative impact on your overall credit scores.

• Credit card issuers are also lowering credit limits to an amount below what you currently owe.

If they do this, it can possibly put you into an immediate financial bind, because the next statement you get from that creditor is going to ask for the difference between your current balance on the account, and the new reduced credit limit. This amount they’re requiring you to pay can amount to thousands of dollars, and if you’re one of the ones affected, more than likely you’re not going to be able to come up with an extra few thousand dollars to pay by the next due date.

What happens if you can’t pay the difference?

If you cannot pay the “Amount Due” to the creditor after a certain period of time (usually about 90 days), then your account will be transferred to the Collections Department. Some creditors have internal collection departments, while others outsource these accounts to 3rd party Collection Agencies. Either way, the collector’s primary task is to convince you to “pay-up”.

Once a debt has been labeled a “collection account” on your credit, you’re going to see an immediate credit score drop. Collection accounts are about as bad as it gets, short of bankruptcy, as far as your credit scores are concerned.

How do collection agencies work?

Collection agencies work with lenders and creditors in a couple different ways. In all cases, collection agencies purchase these bad debts for much less than the amount owed, usually for pennies on the dollar. The first way is for the agency to buy the bad debt so they own it outright. Another option is for the creditor or lender to consign the account to the collection agency. With this option, the creditor or lender agrees to pay the agency a percentage of whatever amount their collectors are able to recover. Percentages do vary, but some collection agencies can make as much as 50% in some cases.

Once the collection agency takes over the account, they give bonuses to their agents if they are able to collect most or all of the outstanding debt. In essence, the collectors make more in their pockets by making you pay more of the debt. This can lead to brutal and unethical collection practices at times.

How Collection Accounts should be handled:

1. First and foremost, don’t ignore the collection account or the debt collector. The problem can only get worse if you do, which may lead to wage garnishments, or even the company filing suit against you which could result in a judgment. Communicate with the collector and be honest about what you can pay and when you can pay it.

2. It’s always in your best interest to pay a collection account as soon as you possibly can, so you don’t incur interest that is going to accrue on the account as long as you have an outstanding balance. This does not mean that you have to pay the entire balance. You need to keep in mind that these companies have purchased your bad debt for pennies on the dollar, so you should try to negotiate and settle the debt for as little as possible. You can start the negotiation process by asking them if they’ll settle for 20% of the amount they’re asking you to pay, then go up from there. Do not include any interest that is being tacked on as part of your negotiation process. The interest they’re trying to charge you is just the icing on their cake.

3. You should be aware that when you are “settling for less than you owe” on a debt with a collector, they are looking to receive the amount you negotiated with them immediately, so make sure you have the money to do so. Once you do come to an agreement, make sure you GET IT IN WRITING before you make the payment.

4. At times, you may hear an unethical collector tell you whatever you want to hear if they think it will help them get you to pay the debt. If they offer to remove the collection from your credit report in exchange for payment, make sure you require them to put this offer in writing first. Collection accounts are never automatically removed just because they are paid, so don’t fall for that trick unless you see it in print on the collection agencies letterhead referencing that exact account.

5. Debt collectors are paid bonuses on how much they can collect in a calendar month. Keep this in mind during your negotiation process. Sometimes calling at the end of the month can be helpful and negotiations may be more to your advantage if that particular debt collector is trying to meet a goal.

In Summary:

Life does have its challenges and can throw you a curve ball from time to time, usually when you least expect it. In some cases like this, it may be impossible to avoid a collection account. You need to know that you do have many rights and there are many important things you need to be aware of.

For more information,
Visit: www.CollectionActCreditTrauma.com

Spending On Credit - Getting Back To Basics

don't think there is one person right now that isn't affected in some way by the current economic downturn we're experiencing.

In some ways, I'm thinking that maybe what is happening right now is a good thing in some respects. Credit limits are being cut, and people can no longer "consolidate" their debt into home equity loans, because most of us don't have any equity available. Don't get me wrong.....these are not "good" things, but I do believe that all of us are having to re-think our spending habits, and THAT IS a good thing.

Do You Really Need Everything You Charge On Credit?

For too long, we have been on the "gotta have it now" program, which has thrown a majority of people into more debt than they can ever afford to pay back. I reflected back myself on things I've bought that I never even used or really needed. Did I really need to spend my money on that? No, not really.....I just "had to have it" for some reason or another that I can't even remember now.

We Need To Cut Back...

We are all so rushed in this life. There is never enough time to get everything done that we want to do. Our life has taken on "outsourcing" to complete the tasks we either don't want to do, or don't feel we have the time to do, or just don't know how to do. Outsourcing takes money and the majority of us just don't have the disposable income we once "thought" we had to pay for these services. We're having to cut back now. The housekeeper and gardener services are being cancelled. We're not buying things we don't really need. We're not going out to eat as much, nor are we going out for our entertainment as frequently as we used to.

I think we all need to get back to basics and learn how to do some things on our own, and for ourselves. We need to re-think our spending habits, focus on reducing our debt, and learn how to "save" money instead of "spending" it. We need to invest in ourselves, our own security, and our own future. We need to set an example for our own government by not spending beyond our means. We need to have emergency funds saved for ourselves, so we can bail ourselves out of our own mess. We need to be accountable for how we got into this position, change our habits and take personal responsibility.

Getting Back To Basics:

Going out to dinner has become a priviliage now, not an expectation. You know what? Recently, I've actually learned how to cook some pretty darn good meals! Not only that, but we're spending more quality time together as a family, because we all get involved in the process. My kids have even come up with a couple of concoctions that pass as "edibile"! You know what the best part is? It's not the homemade dinners that I remember, but the quality time I'm spending with my family actually making them. That's priceless.

Instead of spending money going to the movies, we're dusting off the board games that have been shoved to the back of the closet for too many years. The laughter, jokes, and quality time we're now spending together is bringing us closer together as a family. More priceless memories.
I love taking long walks with my teenage daughter now....talking about her favorite topic....boys. It brings us closer together and the more she talks and I listen, the more she tells me and the closer we get. Trying to relate to a teenager is no easy task for most parents, myself included. I think I've found the key to that dilemma in just listening to her. I find out all sorts of things about her views on life, her dreams and her plans for the future. I try to tell her every chance I get, how proud of her I am and her face just lights up. There is nothing better in the world than the sight of a smile and happiness on your childs face. Now she bugs me to go walking with her....it's become a part of our daily ritual, and one I look forward to every day.

When was the last time you just curled up on the couch in front of the fireplace with a good book or with your spouse and just sat and talked about the good times? I'll bet you'll remember things about times you spent with loved ones or others; not the things you bought. In the grand scheme of things....nothing you bought, brings you more happiness than the things you actually experience with the ones you love.

Take Some Responsibility To Get Out Of Your Current Situation:

Now is the time to take responsibility for our own credit. Credit affects every area of your life, from home loan rates, to insurance premiums, employment, whether or not a landlord will rent to you, and whether you will even qualify for a credit card, along with what rate you will pay. You need to realize the importance of the roll credit plays in your entire life. How much is your "bad credit" really costing you in the grand scheme of things? Maybe you should take the time to read and learn for yourself. If you don't know what you're doing or how it works, then find out! Don't let credit repair companies scam you out of thousands of dollars because you don't know what you're doing.....FIND OUT! It's not rocket science or brain surgery....really it's not. You could probably learn the basics and enough to make a complete turn-around in your life, if you just took a couple hours to read up on the subject.

We need to learn what affects our credit and what changes we need to make so we have the highest scores we can possibly have. This will afford us "choices" in our lives and not rely on some government bail out program that's going to end up costing all of us even more than we owe now.
Now is that time. Credit Trauma will give you all the education you need to become knowledgable and self sufficient in this area. Just check out our "About" section and find out which scenario best fits your situation. You no longer can afford to bury your head in the sand, and you can no longer afford to pay someone hundreds or even thousands of dollars for services and tips that you can use and implement yourself. There are hundreds of resources out there available to you for free....you just have to find them and that's what we're here to help you with.

It's time to get back to basics.....that means taking responsibility and doing more things for ourselves. You know what? It feels good. There is a sense of accomplishement and pride in doing something yourself. I think we all need to get ourselves back on track.....learn how to do the simple things.....and remember back to a time when that's all you needed to be happy.

Visit:

www.RepairCreditTrauma.com

Tighter Credit Reporting Required For The Three Major Credit Bureaus

Credit standards have tightened to the point that you now have to have, at the very minimum, a 680 credit score to obtain financing for a mortgage or home equity loan. If you don’t have that kind of score or better, then you’re going to be denied credit, as millions of Americans have found out first hand in recent months.

Basically, we’re all counting on the fact that the three major credit reporting agencies are reporting accurate information, in order to ensure you have the highest credit score you can obtain based on your situation.

Debts discharged in Chapter 7 bankruptcies affected…

Apparently, this is not always the case though. If you have filed a Chapter 7 bankruptcy which has been discharged, the debts that were included in the bankruptcy could still possibly be showing on your credit report as “unpaid” or “overdue”. This is going to affect your credit score in a negative way, which could then affect whether or not you’re going to be approved for a loan.

Help with this issue however, could be on the way. As the result of an injunction issued by Judge David O. Carter of the U.S. District Court of the Central District of California, against credit reporting giants, Experian Information Solutions, TransUnion and Equifax Information Services, new rules for the credit reporting industry have recently become operational.

New procedures the credit bureaus must follow:

The country's three major repositories of consumer credit information must now follow detailed procedures for the retroactive correction and updating of borrowers' and consumers' credit file information concerning debt discharged in Chapter 7 bankruptcy proceedings as well as new procedures to ensure that debts subject to future discharge orders will be similarly treated.
Michael W. Sobol, an attorney at the national law firm Lieff Cabraser Heimann & Bernstein LLP, which represented the plaintiffs in the litigation, called the new procedures a "paradigm shift in credit reporting industry" that will immediately benefit millions of homeowners and borrowers. "No longer can credit reporting agencies merely parrot back this information as provided by creditors but must now reconcile creditors' information against available public records to assure maximum possible accuracy," he added.

In the class action lawsuit, the plaintiffs alleged that Experian, TransUnion and Equifax violated the Fair Credit Reporting Act by failing to follow reasonable procedures in the reporting of debts discharged in Chapter 7 bankruptcy proceedings. Plaintiffs allege that defendants continued to report debts as unpaid or overdue even though they had been discharged in bankruptcy and defendants were aware of the existence a Chapter 7 discharge order.

When does this take effect?

The new procedures for the credit reporting industry were established under to an injunction approved by Judge Carter in August 2008 in the case of White vs. Experian Information Solutions. The court set Oct. 1 as the date the new procedures became in effect.

"Consumer credit is tightening across the nation due to the crisis in the financial industry," added Mr. Sobol. "It is more important now than ever that consumers' creditworthiness be assessed upon the most accurate information available."

The class action lawsuit remains ongoing with the plaintiffs seeking monetary damages for the defendants' alleged misconduct.

It looks as though we’re going to finally see some self-accountability with the credit reporting agencies.

(Information courtesy of James Comtois – Broker Universe)

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http://BankruptcyCreditTrauma.com

How To “Buy Time” When Late On Your Mortgage Payment

Were you aware that as soon as you’ve missed three (3) consecutive mortgage payments in a row, that most lenders will NOT let you pay less than the full amount (all three payments at once) at that point?

If you’re struggling right now to just keep up with your mortgage payments until you can work out something with your lender, or the government’s bailout program steps in to help you, then did you know that you can continue to run 30 or 60 days behind indefinitely? Most lenders will continue to let you make one payment every month, as long as you are NO MORE than 60 days behind on your mortgage. This isn’t going to help your credit score any, but it does buy you some time.

What happens if I miss that 3rd payment?

Once you miss that 3rd mortgage payment and are a full 90 days delinquent, your lender will no longer accept less than 3 full months of payments to bring you current. They are also required to file an NOD (Notice of Default) against your property, and this marks the beginning of the foreclosure process. From here, the phrase “foreclosure process started” is going to appear on your credit report (and will remain there for 7 years even if you bring the loan current) and your loan is going to start to incur additional, pretty hefty charges because of the process itself.

Unless your lender can work out an arrangement with you before your home “goes to sale”, and you lose it forever, which takes a minimum of 90 days, then buying time by making at least one mortgage payment before you are 3 months down is the best way to go, if you can possibly do it.

What if I’m already 90 days late?

If you’ve already missed 3 months of mortgage payments and your lender has already filed an NOD against your property, the first thing to do is contact that lender and see if they’ll be willing to renegotiate your loan terms, so you do not lose your home. Mortgage lenders are NOT in the business of owning real estate, and right now, the last thing they want is to own another house. They own too many already! If you don’t get satisfaction at the first level that you speak to, ask for their supervisor and keep moving up the “food chain” so to speak, until you actually talk with someone who can answer your questions with the authority to do so. In business, I’ve found that “Those who scream the loudest, get the best service.”

Don’t spend the money!

A lot of folks will have some of their mortgage payment, but possibly not all of it. One of the biggest mistakes you can make if you are in this situation, is to spend that money on something else. Just because the lender will not accept less than 3 payments to bring your account current, does not mean that you will not need to come in with “some money” if you can negotiate a loan modification with your lender. A lender is going to be more willing to work with you, if you’re willing to do your part and bring some cash to the table during the negotiation process. Even if this turns out not to be the case, you’re going to need somewhere else to live and now that your credit is shot, you’re going to look a lot better to a prospective landlord if you have enough cash to come in with first and last months’ rent, along with a security deposit, so be smart about what you do with that extra money.

Visit: http://MortgageCreditTrauma.com

What Is A PayDay Loan?

A payday loan is basically a paycheck advance, also referred to as a payday advance and it is one of the biggest financial mistakes you can make.

Ever borrowed from a “loan shark”?

The purpose of this type of loan is to cover a borrower’s expenses for a short term, until their next paycheck comes in. I like to refer to these types of loans as “mafia loans” or “loan sharks” because of the amount of interest that is charged.

Most loans range from $100 to $500 and the balance is due and payable in two weeks. Interest rates can range anywhere from 400%, and even as high as 900% APR.

How does it work?

These types of lending stores usually have small locations in strip malls within the city. A borrower can walk in and is required to furnish one or more pay-stubs, along with their most recent bank statement, to prove they have a steady source of income. In order to secure the loan, the borrower is required to write a post-dated check to the lender for the total amount of the loan, including the fees that are being charged. The finances charges are usually 15% to 30% of the amount being borrowed for the two week period.

Re-payment for the loan is expected to be in-person. If the borrower fails to show up, then the lender will deposit the check directly, or process an electronic withdrawal directly from the borrower’s bank account. If there is not enough money in the account to cover the check, not only does the bank charge a non-sufficient funds fee, but the loan store is going to charge additional fees or an increased interest rate because of the failure to pay.

Why this is so stupid…

This type of company is basically charging you an arm and a leg for the use of their money for only two weeks! You work hard for your money. Why would you want to give back such a big chunk? It’s basically just throwing money out the window.

Learn how to budget your money and make it last until the next time you get paid. Better yet, take that $30 or $80 finance charge you were going to pay and put it in savings. That way, next time you’re in need of cash before you get paid, you can withdrawal it from your savings instead! Now that’s a novel idea!

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http://RepairCreditTrauma.com

How To Establish A Good Credit History

A good credit history is established by keeping your commitments to repay credit cards or loans as agreed, making your payments on time and in the amounts required.

Neglecting to do so make it difficult and costly for you to borrow money for the things you need for yourself and your family. This can affect essential areas in your life such as renting an apartment or buying a home, getting insurance, an education or even medical care.

Plan for emergencies!

Things in life occur that are not under our control, such as losing a job, or getting into a car accident, which can impact your ability to repay your bills. This is why it’s critical to set up a savings account and contribute to it on a regular basis. This will ensure you have emergency funds available to honor your credit agreements in spite of any unforeseen challenges.

Unfortunately, creditors don’t care what your situation is. If you’re late on a payment, they’re going to report it as late, and that late payment will remain on your credit report for 7 years. It will also have an impact on your credit score for the first two years. That’s pretty harsh for just one 30 day late payment, but that’s how it works.

What if you don’t have credit?

If you have not yet established credit, or you do not use credit, it’s in your best interest to apply for one or two cards. It takes about 2 years to really establish a credit history with enough information in it for a lender to make a risk-based decision for large purchases. You do not have to keep a balance on your credit cards if you’re adverse to credit. Just charge a small amount every other month or so and pay off the balance. This will ensure the account remains open and active with the creditor, and updates will be transmitted to the credit bureaus accordingly, which will give you the credit history you need, along with a good credit score.

If you are trying to re-establish your credit, and you cannot qualify for a traditional credit card, then one option that is guaranteed for you is to obtain a “secured card”. With this type of card, you deposit typically $300 to $500 in an account with the creditor and that amount becomes your credit limit. Because you are using your own money, there is no risk to the creditor.

A couple things to make sure of when applying for a secure card:

Make sure the company you’re applying with reports to at least one of the three major credit reporting agencies. If they do not, then move on, because if they do not report, you are losing a major benefit.
Shop around for the lowest annual fee. All secured cards charge an annual fee, and some can be pretty hefty. Make sure to read the fine print first!
Most secured card companies will allow you to get an “unsecured card” after about a year of making your payments on time. Be sure to check on this, because you don’t want to have a secured card any longer than you have to. It’s too costly.

If you belong to a credit union, ask them if they offer secured cards. About half of the nation’s credit unions offer secured cards to their members and they may offer lower interest rates and waive annual fees.

Use the secured credit cards carefully; paying off the debt each month. You do not get this type of card to carry a balance on it. Remember, you’re using your own money as collateral. You don’t need to pay the creditor interest on top of that.

Points to remember…

In summary, to establish a good credit history, remember to keep your overall debt at a reasonable level that is relative to your income. Generally speaking, your expenses should not exceed 20% of your net (after taxes) take home pay, excluding your housing payment.

Visit: http://RepairCreditTrauma.com

Do You Still Get A Credit Score If You Pay-Off Your Balances IN FULL Every Month?

There is conflicting information going around about this particular subject and most of it is un-true.

Yes, even if you pay-off your credit card balances in full every month, this practice will still contribute to generating a credit score for you. Some folks are under the wrong impression that they need to keep a balance on their account(s) in order to generate a score. This is completely false.

If you make charges on a credit card that you pay-off in full every single month, then in actuality, your credit report will NEVER show a zero balance. Why? Because the creditor updates your account with the credit bureau’s at the same time that your statement cuts off. So, every time your statement cuts off, you have a remaining balance, which is why it will never show zero and will always contribute to your credit score.

Now you may think that because you pay-off your account(s) in full each month, that you’ll always have a high score right? (This is assuming that all the other credit you have is paid-as-agreed.) This isn’t always the case and let me explain why.

Even if you pay off your balance in full, your credit score can actually drop...

Let’s say you have a high credit limit of $500 on the one particular credit card that you use and pay-off every month. This past month, you charged $400 on that card. That means you’ve used 80% ($400 divided by $500 = 80%) of that card’s available credit limit.

This affects your balance-to-limit ratio which, for the best credit scoring results, should be kept at, or under 30%, but no more than 50% maximum. If you go over these amounts, it’s going to drop your credit score during that period.

Not to fear…your score will go right back up again the following month as long as you keep your balance at 30% or under, so this will only affect you for a short period of time, but it’s definitely something you’ll want to keep in mind for the future!

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http://RepairCreditTrauma.com

Beware….Not All Credit Scores Are The Same!

When did credit scores come into being?

Around 1990 or so, the very first credit scoring system, which was created by Fair Isaac Corporation, began increasing in popularity with lenders. During the mid-90’s, Fannie Mae and Freddie Mac began using these FICO scores exclusively, which created the standard use of credit scoring today.

It’s only been fairly recently, since about 2001, that credit scores have been made available to the general public. The credit bureau’s capitalized on this, as they all began charging consumers for their FICO score. Due to the fact that they had to pay Fair Isaac Corporation royalties on every sale made, the bureau’s themselves decided to create scoring systems of their own. Ultimately this gave them a bigger piece of the pie and a chance to create more services to become even more profitable.

Beware of ads for “free credit reports”!

This is the reason that you see ads and commercials everywhere these days promoting “free credit scores”. These free scores are NOT FICO scores and the scores you receive may differ greatly from the actual FICO scores that are used for mortgage lending purposes.

There are many different scoring models being used today in many different industries. If you do not know exactly which scoring model you’re getting a score from, then it really doesn’t mean anything. Some scoring models have ranges up to 950, whereas FICO scoring model only goes to 850. If you choose to get your score from some unknown company, you might think you have a better credit score than you actually do.

These companies that are offering free credit scores usually make you sign up for some type of credit monitoring service that charges you monthly. Unless you’ve been a victim of identity theft, there really is no reason to need a credit monitoring service. You can check your credit report once a year at no cost to you, for all three bureaus thru http://AnnualCreditReport.com.

You know the old adage….

”If something sounds too good to be true, it usually is.”

Visit: http://RepairCreditTrauma.com

What Happens To Your Credit Score If You Lose Your Home Equity Line Of Credit?

More and more banks are re-calculating the estimated value of your home because of the declining property values hitting our entire country. Let’s face it…..they’re scared.

If they determine that the current value of your home has dropped severely enough, one of the ways they can reduce their possible risk it to freeze your existing credit line, (if you have any portion that is un-used anyway) so you no longer have access to those funds.

Guess what…this just hit your credit score!!!

This can even affect people with excellent credit because now, that “high credit limit” has just been reduced, which can negatively affect your “balance-to-limit” ratio. Because this particular category carries 30% of your total credit score weight, the loss of that credit limit on your existing line of credit can cause your credit scores to drop; and in some cases, this drop may be huge.

On top of the hit to your credit scores, now you no longer have use of those “emergency funds” if you ever need them. This can create a financial hardship on you, in itself. Of course if you’re already maxed out on your HELOC, there is nothing the bank can do and your scores are already reflecting the fact that your line is maxed out.

Unfortunately there is no way to know if your bank is going to pull the rug out from under your existing credit line, if they haven’t done so already. You’ll find out when you get a letter in the mail from your lender and by then, the deal has been done and your line has already been frozen.
What can I do if I still have funds available?

If you do have money available on your existing line of credit and you know you’re going to need that money in the future, the only choice you have to be certain that the funds are still going to be available, is to draw out the remaining balance and place it in the highest interest bearing account that you can find. If you know you’re not going to use it for a year or so, consider a CD (Certificate of Deposit). Shop around at your local banks or go on-line. Rates for CD’s can vary greatly from institution to institution and a lot of them have specials going on all the time. If you don’t want to lock it up for a long term, then shop around for a high paying money market account.

The only drawback to this temporary solution is you will have to pay interest on the entire balance every month. Because Lines of Credit are all tied to Prime Rate, we’ll all just keep our fingers crossed that the Fed will leave it alone so we can juggle our finances a bit longer during this crisis!

Visit: http://mortgagecredittrauma.com

How do I claim a short sale or short-refi on my taxes?

The tax code has been temporarily amended because of the mortgage crisis that has hit our entire country.

This break comes in the form of "The Mortgage Forgiveness Debt Relief Act of 2007", whereby in certain circumstances, a homeowner does not have to pay federal income tax on debt forgiven on a loan secured by a qualified principal residence via a short sale, foreclosure, deed in lieu, loan workout or short refinance. ( A short refinance is defined as "where the loan amount was reduced and forgiven in order for the homeowner to keep the property".)

This is great news for many a homeowner, because in prior years, any remaining balance was considered income for which you would owe taxes.

Under this new law, there is no federal income tax due on debt forgiven on a loan that is secured by the seller's principal residence, provided that the loan was made to acquire, construct, or substantially improve the principal residence. Also, a short-refinance of that type of loan also qualifies for the exemption.

However, if you just pulled money out of your house to pay for a vacation and got debt relief on that loan, you would be subject to income tax.

The exemption applies to any portion of loan debt forgiven beginning January 1, 2007 through December 31, 2009.

Therefore, it doesn't matter when the loan was made; what matters is when a portion of the debt is forgiven.

IRS Income Taxes on debt relief due to foreclosure, is NOT automatic though…

You have to file IRS Form 982 "Reduction of Tax Attributes Due to Discharge of Indebtedness," and the form has to be attached to the federal tax return.

Many people entitled to this tax break aren't filing the form and they should be.


http://MortgageCreditTrauma.com

Does it help your credit scores to close an account?

Were you aware that positive credit history stays on your credit report forever?

Did you know that when you close an account, becomes inactive after 6 months (meaning it no longer contributes to your credit score) and the entire account, history and all, gets automatically deleted after 10 years?

So contrary to popular belief, as long as an account is positive, meaning there are no late payments associated with it, then you DON'T want to close the account.

Now, if you don't use it once every 3 months or so, the account will become inactive and will no longer be a contributing factor to your credit scores, which is the whole purpose of not closing it in the first place. So, charge $20 bucks on it every so often and pay it off when the statement comes in. This will ensure that the creditor will not close it or stop reporting the activity to the credit bureaus, and it will continue to add to your positive credit history and reflect positively in your credit scores too!

Thirty-five percent (35%) of your credit score revolves around your payment history and your scores get very happy when they have a long-term account that is always paid on time!

On the other hand, if you are a charge-o-holic, maybe the best thing for you is to actually close the account if you don't trust yourself enough to leave it the heck alone. If this sounds like you, go ahead and close it until you get everything paid off. Get your finances and spending habits under control first, and if closing an account takes away the temptation to charge, then by all means, get rid of it.
As I always tell my kids, "you can always start over tomorrow".

http://RepairCreditTrauma.com

No benefit for "authorized user" on credit reports....

When someone finds a loophole in the IRS rules, you're going to see a bunch of folks exploiting it until the IRS figures it out and takes the loophole away from you. Ahh.....it was nice while it lasted huh? The same thing has happened with "authorized users" in regards to increasing your credit score by "piggy-backing" off of another's positive account rating.

The following is the definition of an Authorized User: "Person permitted by a credit cardholder to charge goods and services on the cardholder's account, but who is not responsible for repayment of the debt. The account displays on the credit reports of the cardholder as well as the authorized user."

Originally, the purpose of an "authorized user" was to allow a family member or close relative to be added onto your account and that person was allowed to make charges against that account. This was especially helpful for young adults trying to establish credit for the first time. A parent would add their teenager onto an existing account of theirs and typically, this would be the first type of charge account a young person would have. With the parent's guidance, they could teach their teenager the advantages and disadvantages of using credit, along with teaching them the responsibility that comes along with it. If they managed this type of account well, then it would reflect as such, in establishing a credit history and a good credit score to go along with it. This practice enables a person to qualify for things that they wouldn't, under normal circumstances, qualify for, which constitutes a form of fraud.

Of course, scammers found this loophole in the credit scoring system and decided to abuse it for monetary gain. In the past few years, these scammers would solicit people who needed to establish or re-establish credit and they would be offered the opportunity to piggy-back off of someone else's positive account, (that they didn't know) for a fee. Once they were set up as an authorized user on this account, that person's account and the credit history that went along with it, would automatically reflect on the authorized user's credit report and would therefore generate a good credit score for them.

Unfortunately, because of this abuse, Authorized User accounts are no longer a contributing factor in credit scoring, so they will no longer benefit the authorized user in that respect. These types of accounts are still available thru creditors, and they will still reflect on the owner's credit report and the authorized user's credit report, which will show the account's history, but the greatest benefit of the account reflecting in the credit scores is now history.

http://RepairCreditTrauma.com

Credit scores affect many things...

Did you know that your credit score affects more than just your ability to obtain credit? Today, credit scores can determine the interest rate you pay on your credit cards. The ability to purchase or refinance a home is severely impacted if you don't have a minimum credit score of 680. Your insurance rates will be much higher if you have bad credit. You may not be able to qualify for a job in the finance sector if you can't demonstrate that you, yourself have the ability to manage your finances. Landlords routinely evaluate your credit to determine if you are a good risk to rent to. If you are able to find someone to rent to you, then you may be faced with a high deposit with the utility companies, if you have a low credit score rating.

Today, more than ever, managing your credit report is one of the most important factors of your life and can have a huge financial impact on your pocketbook. You're perceived to be a higher risk when you have a bad credit score, and therefore limits your options, or hits your wallet in many areas. Now is the time to pay attention to exactly what affects your credit scores, and what you can do to increase them with some simple awareness and change of habits. A good credit score is going to save you thousands of dollars in the course of your lifetime. Check your personal credit on a regular basis with a free credit report supplied by www.AnnualCreditReport.com to ensure there are no erroneous errors showing, and if there are, be sure to dispute these right away. This is a simple way to increase your credit score rating immediately.

http://RepairCreditTrauma.com